How cognitive ability and financial literacy shape the demand for financial advice at older ages

TitleHow cognitive ability and financial literacy shape the demand for financial advice at older ages
Publication TypeReport
Year of Publication2019
AuthorsKim, HHoikwang, Maurer, R, Mitchell, OS
Series TitleNBER Working Paper Series
Document NumberNBER Working Paper No. 25750
Pagination1-20
Date Published04/2019
InstitutionNational Bureau of Economic Research
CityCambridge, MA
KeywordsCognition & Reasoning, Financial literacy, Social Support
Abstract

We investigate how cognitive ability and financial literacy shape older Americans’ demand for financial advice using an experimental module in the 2016 Health and Retirement Study. We show that cognitive ability and financial literacy strongly improve the quality, but not the quantity, of financial advice sought. Most importantly, the financially literate and more cognitively able tend to seek financial help from professionals rather than family members, and they are less likely to accept so-called ‘free’ financial advice that may entail conflicts of interest. Nevertheless, those with higher cognitive function also tend to distrust financial advisors, leading them to eschew their services.

URLhttp://www.nber.org/papers/w25750.pdf
DOI10.3386/w25750
Citation Key10036